Help to Buy scheme extension costs being unveiled

Houses Homebuyers in England may be able to find a mortgage, even if they do not have huge savings

Banks have begun to unveil mortgages which they will offer under the expanded Help to Buy scheme.

The government's initiative is designed to enable buyers who can afford only small deposits to buy a home.

RBS, NatWest and Halifax will start taking applications this week, with HSBC and Virgin Money joining later.

There have been concerns the scheme could fuel a housing price bubble, but Treasury Secretary Danny Alexander told the BBC that there is no UK price boom.

"People who think that there's a housing bubble should get out more. They should get out of Kensington and Chelsea, and go to Manchester or Birmingham, and major towns across the country," he said.

He said the scheme would help those people who did not have "piles of cash" for a mortgage deposit.

RBS and NatWest are offering a two-year, fixed-rate mortgage starting at 4.99% for those with a 5% deposit, with no fee.

Halifax will be taking applications in a few days at a rate of 5.19% with a £995 fee for those with the same deposit.

HSBC said it would join the scheme later in the year, with Virgin Money and Aldermore saying they would offer Help to Buy mortgages from January.


The scheme is getting under way as surveyors report their sales levels are at their highest for nearly four years.

The Royal Institution of Chartered Surveyors (Rics) said a large majority of surveyors were expecting house prices to rise.

Start Quote

Mistakes could distort the housing market or carry threats to financial stability”

End Quote Treasury Select Committee

The first phase of the Help to Buy scheme in England started in April, when buyers of newly built homes were eligible for a 20% equity loan from the government on top of their 5% deposit.

Similar schemes are operating in Scotland and Wales.

Under the second phase, buyers across the UK only need to provide a small deposit, with the government offering a guarantee of 15% of the loan to the lender - for a fee - to encourage the bank or building society to offer the loan.

That fee charged to the lender is expected to be up to 0.9% of the original loan level. This is a one-off fee dealt with entirely by the lender, which guarantees 15% of the mortgage for seven years.

Those who apply will face checks to make sure that they can afford the mortgage payments. The Council of Mortgage Lenders (CML), which represents lenders, said affordability checks would be as "rigorous" as they were with any borrower.

The scheme will be available for first-time buyers and home movers borrowing to buy new and old homes valued at no more than £600,000. It is expected to continue for three years.

It means a buyer looking to purchase a home costing £200,000 would have to put down a deposit of around £10,000. Demands have been much higher than this for many first-time buyers since the start of the financial crisis, usually about 20% of the value of a home.

Best buys?

Prime Minister David Cameron announced at the Conservative Party conference that the second phase of the scheme would be brought forward by three months from January.

Dickie and Heidi Steel say they can save up more quickly for a 5% deposit

A number of lenders have expressed an interest in joining the second phase. Lloyds Banking Group and RBS are the most prominent. Other lenders have yet to commit.

Some products from the Halifax and Bank of Scotland will be available from Friday, with deals from other lenders expected to be in place by January.

Comparisons on the interest rates are difficult, as there are so few 95% mortgages on the market at present.

The most competitive, widely available two-year fixed rate mortgage before Help to Buy, for those offering a 5% deposit has an interest rate of 5.95%, according to financial information service Moneyfacts.

For those able to offer a 10% deposit, the cheapest mortgage deal was 3.54%, with a fee of £1,675, Moneyfacts said.

Price rises

An influential group of MPs has echoed concerns about the potential effect of the Help to Buy scheme. The Treasury Select Committee said that great care was needed from the government when setting up and running the scheme.

"Mistakes could distort the housing market or carry threats to financial stability," it said.

Housebuilding The first phase of Help to Buy was aimed at stimulating housebuilding

It said that - without care - the scheme could raise house prices, rather than stimulate the number of homes for sale.

"We continue to believe that the government of the day will face strong incentives to extend the scheme, with the attendant risk that the mortgage guarantee scheme becomes a permanent feature of the UK mortgage market," it said.

Last month, Chancellor George Osborne asked the Bank of England's Financial Policy Committee (FPC) to make annual reviews of the scheme, starting next September. The committee had been due to make an assessment only after its first three years of operation.

Treasury officials said that the FPC would advise on the fee that lenders have to pay, which could be changed each year, and whether to change the £600,000 limit.

Mr Osborne said that the housing market was recovering from low levels of activity and the latest extension of Help to Buy would help many more people get a foot on the ladder.

Mr Alexander said the Treasury Committee was right to say that Ministers should keep a close watch on Help to Buy. "We will make adjustments if they (the FPC) recommend them," he said.

Shadow Treasury Minister Chris Leslie describes Help to Buy as a "lopsided approach"

He also rejected criticism that the government should be tackling a house supply shortage, rather than demand. "All the housebuilders tell us is that what is holding them back (building more houses) is a lack of demand," he said. "There are lots of other policies that this government is doing to tackle demand."

Chris Leslie, shadow chief secretary to the Treasury, questioned whether homes as expensive as £600,000 should be included in the scheme, and said that more affordable homes should be built.

"Unless George Osborne acts now to build more affordable homes, as we have urged, then soaring prices risk making it even harder for first-time buyers to get on the housing ladder. You can't tackle the cost of living crisis without building more homes," he said.


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  • rate this

    Comment number 237.

    I'm still trying to get my head around the fact that the government is extending the scheme to include properties up to the value of £600,000 (£400,000 north of the border).
    Surely to God, anyone interested in a house worth more than £1/2 million doesn't need help from the poor bloody tax payer...
    Am I missing something..?

  • rate this

    Comment number 236.

    @233. james
    I'm waiting for a real house price crash

    I wouldn't hold your breath.
    @234. steve 'out of this little Ponzi scheme'
    It simply helps those who need to buy now can't afford the deposit and are prepared to take the risk and the cost of it ..
    It's not for everyone -- I certainly wouldn't consider it's more expensive in the longer run .. but for some it is help!

  • rate this

    Comment number 235.

    224.esllou Government won't allow house prices to fall & reach more 'natural' levels because we are obsessed with high house prices in this country, something I've not seen in any of the 8 countries I've lived in. A rising tide lifts everyone - how happy do you feel that your house is now worth 20% more? Every other house is also 20% more. It's an insane racket everyone buys into. Why?
    BTL !

  • rate this

    Comment number 234.

    Cameron has rather bet the House on the Towel Stacker's Sums adding up.
    If as virtually anyone who doesn't stand to gain out of this little Ponzi scheme believes what will happen is Prices will rise ,properties will become less affordable and little additional construction will take place, then this will be a difficult fiasco to blame on the last Labour Government

  • rate this

    Comment number 233.

    Help to bankruptcy scheme unveiled. Negative equity and high interest rates. Bring it on, that'll fix the greedy social climbers. There's been a house pricing boom for over 30 years, even the 2008 mess couldn't dent it. I'm waiting for a real house price crash, a one where you couldn't even pay people to live in Buckingham Palace.

  • rate this

    Comment number 232.

    When the financial crisis happened, government blamed banks for providing 95%/100%+ morgages & taking too much risk.

    Banks then changed policy to reduce risk & require a more conservative 10%/20% deposit.

    Now government is re-creating the risk they opposed & using public liability to finance it.

    Make one wonder who these 1st time buyers will vote for in coming election

  • rate this

    Comment number 231.

    163. Nick
    Some people I know have earnt more from their house price going up than from working - £50k per year
    Jealousy gets you nowhere.It their good day when you work save up and finally buy your house do it up and it starts going up. I am darn sure you won't complain!
    Not saying it ain't tougher now sadly nothing gets any easier!

  • rate this

    Comment number 230.

    Whats the problem with BTL landlords, my parnter saved for Her pension only to see the returns slashed by low bank interest rates. Which was caused by the US housing sub prime debacle. if we are not careful we will see this again in the UK, we usually follow the US by 10 years.
    She invested in BTL and see's a decent return on Her savings, and can now enjoy the retirement she worked hard for!

  • rate this

    Comment number 229.

    The limit should never have been set at £600k which was obviously done to help the already well healed - this means in effect that the government will guarantee some £90k to the already well off. You can just see the scams already! And guess who picks up the tab - you and I.

  • rate this

    Comment number 228.

    I have a few issues with this scheme but the biggest of all is that this includes homes up to £600,000!!

  • rate this

    Comment number 227.

    Perhaps the new governor of the Bank of England will be smart and link interest rates to house price inflation, not stupid unemployment. Ensure rates are always five percent above house price inflation. Ensuring saving for deposits works.

  • rate this

    Comment number 226.

    So the bank collapse started when the US governments funding of house purchasing in USA caused a bubble and when the recession hit people couldn't pay their mortgages and the whole pack of cards collapsed. Now the British government is funding house purchase. This risk is being created by Osborne to get more votes without any concern for the future debt its creating for individuals and the country

  • rate this

    Comment number 225.

    taxpayer money should never be used to guarantee things like loans or borrowing.

    If i want to invest my money like that, i'll pay into a mutual fund or the like.

    however i have neither the funds or desire to guarantee loans, so the government shouldn't use my money to do this.

  • rate this

    Comment number 224.

    The government won't allow house prices to fall & reach their more 'natural' levels because we have an obsession with high house prices in this country, something I've not seen in any of the other 8 countries I've lived in. A rising tide lifts everyone - how happy do you feel that your house is now worth 20% more? Every other house is also 20% more. It's an insane racket everyone buys into. Why?

  • rate this

    Comment number 223.

    @199. nicknack1

    I'll qualify that. It's a safe bet if you are in the right location and you offer the right service i.e. a place to live that's clean good value and are able to afford to maintain it and compete with others in the market place. Like any other business.

  • rate this

    Comment number 222.

    This is simply a ploy by the government to get the taxpayer to artificially prop up the housing market through to the next election.
    Why ? - So that their "friends" and "backers" can slowly pull out of the market having made a nice little profit and leave the taxpayer and young house buyers to pick up the pieces following their election defeat !
    Wake up Britain.

  • rate this

    Comment number 221.

    Fiddling the deck chairs on the Titanic, eh! more houses, tax land, incentivise cheaper greener houses. Simples! Sacrificing the nations future/wellbeing for a cheap election victory - not great! Get these clowns out, they aren't working for us. Revolt!!

  • rate this

    Comment number 220.

    199. nicknack1
    I disagree, BTL landlords have plenty of other options to invest their money, first of all they could invest in businesses (which creates more than jobs than renting houses).

    Aye but it's a safe model to start. It's been tried and tested and for those who want to play it safe it's a safe bet. I am actually investing in a business too, hopefully it will create jobs in the future.

  • rate this

    Comment number 219.

    77. The realist

    Many trades & businesses depend on an active housing market and a boost outside of London will provide help to many who are struggling, from plumbers & electricians to DIY stores and kitchen designers.
    The trades you are referring to are not generally associated with financial hardship!

  • rate this

    Comment number 218.

    Can the BBC report “203. SB Yorkshire” to HMRC for tax evasion. That should help the deficit.
    “the self employed still really really struggle, need low profits for tax need high profits for a reasonable lend.”


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